By Phillip B. Rarick, Miami Trust Attorney, and Hannah S. Rarick, J.D. Candidate

Effective as of last year July 1, 2021, Florida is now 1 of 15 states to enact the Uniform Directed Trust Act (FUDTA), F.S. §§736.1401 to .1416, that allows a third party other than the Trustee to take over some part of the trust administration – such as supervision of a small family business. This third party is called a Trust Director (or directing Trustee) in the new statute; but is also commonly referred to as a Trust Advisor under prior law or Trust Protector in other jurisdictions.

Here are Five key points in the new Directed Trust Act: 1. Expanded Trustee Protections. The focus of the new act is to expand the guidelines and protections for Trustees who are “directed” to take or not take certain actions during the trust administration. F.S. 736.1409. The person who can give such directions is now referred to as either (a) Trust Director (F.S. §736.1406) or (b) a “directing Trustee” (F.S. §736.1412).

Note: I am going to use “Trust Director” as I find “directing Trustee” confusing. The act anticipates that the Trustee will not

also serve as Trust Director otherwise why then do you need a Trust Director? However, the new law does not prohibit a Trustee from also serving as a Trust Director.

2. Powers of the Trust Director. These powers are very broad and include power over investment, management, distribution of trust property, amend trust, and terminate Trust. Powers that are excluded include powers of appointment and the powers to remove a Trustee or Trust director.

3. Clarification of Trust Director Standard of Care. Before FUDTA, it was not clearly defined what fiduciary duty was imposed on the Director. Now, the new law states the Trust Director’s minimum duty is to act in good faith and in accordance with the beneficiaries’ interest, which is parallel to a Trustee. This duty is applicable to any person who holds the role of directing a trustee, despite the title of the position.

4. Trust Director Can Now Issue a 6-month limitation notice. A 6-month limitation notice can now be issued by both the Trustee and Trust Director. A Trust Director can issue 6-month limitations notice per F.S. 736.1008 that can effectively cut off claims by a beneficiary of the acts of the Trust Director unless an action for breach of trust based on matters disclosed in a trust accounting or other written report is commenced within 6 months after receipt from the trustee or a trust director of the limitation notice.

5. Effective date: July 1, 2021. But here is the curve ball. The new law is currently effective, although F.S. §736.1403 provides “(a) If the trust was created before July 1, 2021, this part applies only to a decision or action occurring on or after July 1, 2021.”

Special Note

The information on this blog is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on the information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult an experienced Miami Trust attorney. Your receipt of information from this website or blog does not create an attorney-client relationship and the legal privileges inherent therein.

______#2. Successor Trustee. This is the person you have appointed to step into your legal shoes if you become incapacitated – in other words, one of the most important decisions you can make. Who have you appointed to take charge if you are incapacitated? What is the order of succession of trustees who will take over management of your financial affairs if you are unable to do so? If you have any question whatsoever about your order of succession, please call the office.

______#3. Transitions. Has there been a marriage, divorce, or separation of anyone named in your will or trust? Has there been a birth or adoption of a child or grandchild? If so, your estate plan may need to be amended.

______#4. Asset Protection. The recession may be over, but will your business survive the recovery? Do you know which assets you own that are protected and which are exposed? NOTE: While a living revocable trust helps avoid probate and keep legal control in your family, it does not protect your assets. We have a number of other legal tools to help make you an unattractive target for a lawsuit. If we have not done a recent asset protection analysis, now may be a good time to do so.

_____ #5. Life Insurance. When is the last time your checked (a) the owner of your life insurance policies; and (b) the beneficiary designations for those policies? Most life insurance either should be owned by an irrevocable life insurance trust or name your trust as the primary beneficiary. Why? If the policy is owned by a life insurance trust that is properly maintained, you protect the full value of the policy by avoiding estate taxation if you have a taxable estate. If the policy does not name your trust as a beneficiary, all the instructions in your trust to safely manage that money will be useless.

______#6. Corporate Minutes. If you have an incorporated business, when is the last time that you filed corporate minutes? It is important, at the least, to keep annual minutes. Remember, the corporate veil can be pierced and your personal assets attacked if you do not follow the corporate formalities. We will review your corporate minutes at no charge; if the record needs to be updated, we will advise you of the total cost to bring the record current.

______#7. $13,000 Gift Allowance. Do you wish to consider making gifts to family members to reduce your estate tax exposure? Current law allows you to make gifts of $13,000 per person per year ($26,000 if married) with little or no tax consequence to you or the recipient. For many persons, this is an effective tool to reduce your estate tax liability. However, see the warning in Point #8 for gifts to minors. NOTE: Gifting must be done prior to January 1; preferably November or early December. ______#8. Gifting To Minors. Beware of UGMA accounts! The full name is Uniform Gift to Minors Act. Unless your child is a future Warren Buffet, it is not advisable to give minors any substantial gifts without placing those funds in a trust. UGMA accounts should be used for only small amounts – such as $1,000 or less. Otherwise, the minor can have complete access to the funds when he or she turns 21.

______#9. Estate Tax Check. Do you know your current estate tax exposure? Absent congressional action the exemption will fall back to $1 million per person with a top rate at 55% on January 1, 2011. Following the Republican mid-term election successes, Congress may act to change the estate tax law. Stay tuned – we will be sending out an Alert via e-mail if Congress does so act. Note: If you have a trust with a Marital and Family Trust (technically called a credit shelter trust) and we have not recently reviewed your estate plan, we should run the numbers to see if the funding formula in the trust allocates the exemption to achieve appropriate tax planning for your family.

______#10. Health Care Surrogate. If you have a child over 18 who is now in college it is highly recommended that he/she give you legal authority to make medical decisions on their behalf. Remember, once your child turns 18, he/she is sui juris, and you have no legal authority to make any legal decision on their behalf. Also note, if we have not met to review your estate plan since 2004, it is likely that your health care surrogate is not current.

______#11. Estate Plan Review. Has it been more than two years since we sat down and reviewed your estate plan? If so, I recommend we schedule a meeting before the end of the year to assess whether it continues to meet all the needs of your family.

APPOINTMENT: To schedule an appointment to review or update your estate plan or the funding of your trust, call Rarick & Associates at (305) 709-2858 or email Phil at prarick@raricklaw.com.